The Australian Competition & Consumer Commission v Telstra Corporation Ltd
[1996] FCA 1099
•13 DECEMBER 1996
CATCHWORDS
Trade Practices - Enforcement and remedies - Injunctions - Misrepresentations made in television and radio broadcasts - Injunctive order limited to such communications.
Procedure - Declarations - Appropriate form of relief - Discretion of court - Allegations in proceeding not after its institution at any time denied by respondent and admitted at first hearing and to the general public by advertisement - Declaration held inappropriate.
Trade Practices Act 1974 - ss 52, 53(e), 80
THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v. TELSTRA CORPORATION LIMITED
VG402 of 1996
Jenkinson J.
Melbourne
13 December, 1996
IN THE FEDERAL COURT OF AUSTRALIA )
VICTORIA DISTRICT REGISTRY ) No. VG402 of 1996
GENERAL DIVISION )
BETWEEN:THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND:TELSTRA CORPORATION LIMITED
Respondent
CORAM: Jenkinson J.
PLACE: Melbourne
DATE: 13 December, 1996
MINUTES OF ORDER
THE COURT ORDERS THAT:
The respondent be restrained until 31 December 1999 from making in Australia in trade or commerce a false or misleading representation for transmission to the public in a radio program or a television program with respect to the amount of any charge, within the meaning of that word defined in section 5 of the Telecommunications Act 1991, for a telecommunications service, within the meaning of that expression defined in the said section 5, offered by the respondent to be supplied in Australia to any person or persons.
The applicant's costs of the proceeding be paid by the respondent.
The claims in the originating application be otherwise dismissed.
(Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.)
IN THE FEDERAL COURT OF AUSTRALIA )
VICTORIA DISTRICT REGISTRY ) No. VG402 of 1996
GENERAL DIVISION )
BETWEEN:THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND:TELSTRA CORPORATION LIMITED
Respondent
CORAM: Jenkinson J.
PLACE: Melbourne
DATE: 13 December, 1996
REASONS FOR JUDGMENT
Trial of a proceeding for declaratory and injunctive relief.
The proceeding commenced on 11 July 1996. When on 30 July 1996 the parties appeared by counsel on the first directions hearing the court was asked to try the proceeding that day on the statement by counsel for the respondent that all but one of the allegations in the statement of claim were admitted and on several affidavits deposing to some of the facts alleged in the statement of claim and disclosing other circumstances relevant to the determination of appropriate relief. That suggested course was adopted.
On 27 June 1996 Optus Communications Pty. Ltd. ("Optus") announced the inception of its provision of a local telephone call service in Australia and stated that the charge for each local call would be 20 cents. At that time the generally applicable charge for each local call on the respondent's telephone service was 25 cents. On that and the following day several officers of the respondent made public statements which it was admitted by its counsel justified the following allegations in the statement of claim:
"3.In late June 1996 the Respondent made the following representations in relation to the cost of local calls made under a plan offered to its customers known as the Local Call Saver 15 Flexi-Plan ("CS 15").
(a)if customers make more than 2 local calls a day a discount of 15% applies which results in all local calls costing 21 cents;
(b)if customers spend more than $15 per month (2 calls per day) all local calls above that attract 15% discount;
(c)discounts are available on all local calls made under CS 15;
(d)CS 15 is available to all customers without limitation."
........ ........ ........ ........ ........ .......
"4.The representations were false in that:
(a)if customers make more than 2 local calls a day a discount of 15% does not apply which results in all local calls costing 21 cents;
(b)if customers spend more than $15 per month (2 calls per day) all local calls above that do not attract 15% discount;
(c)discounts are not available on all local calls made under CS 15;
(d)CS 15 is not available to all customers without limitation.
PARTICULARS
CS 15 is a single account only plan available only to residential customers who have Call Line Identification/Call Charge Recording. It provides a discount on the customer's eligible calls according to the following structure, with the discount applying only to those calls within each tier:
Monthly Expenditure Discount
on Eligible Calls
$0 to $15 0 per cent
$15 to $100 15 per cent
over $100 0 per cent
Where calls are eligible for discount under Local Call Saver 15 and another optional calling plan, calls will only be discounted by the plan offering the highest applicable discount.
Eligible calls for the local Call Saver 15 are: automatic local calls, FaxStream local calls, Iterra local calls, and PSIS NDDI voice calls.
The standard tariff which is charged by the Respondent for a local call is 25 cents.
The discounts available under CS 15 are as follows:
Average Total calls Average call
calls made in a month cost in month
per day2 60 25 cents
3 90 23.75 cents
5 150 22.75 cents
6 180 22.5 cents
10 300 22.0 cents
12 360 21.88 cents
13 400 21.81 cents
15 450 22.17 cents
20 600 22.88 cents
23.3 700 23.18 cents5.By reason of the matters referred to above the Respondent has in trade and commerce engaged in conduct that is misleading or deceptive or is likely to mislead and deceive in contravention of section 52 of the Act.
6.Further by reason of the matters referred to above the Respondent has in connection with the supply or possible supply of services or in connection with the promotion by any means of the supply or use of services:
(a)........ ........ ........ ........ ..... ........ ........ ........ ........ .....
(b)made a false or misleading representation with respect to the price of CS 15 in contravention of subsection 53(e) of the Act."
Particulars under paragraph 3 of the statement of claim include the following:
"(a)On Thursday 27 June 1996 Peter Shore commercial and consumer managing director on behalf of the Respondent stated in an interview with Kerri-Anne on Channel Nine's Midday Show that
`...over the last 6 months in Australia people have had a chance to have a 21 cent local phone call. We've a 15% discount scheme for those customers who spend more than $15 a month so our basic price for customers on $15 a month or more through our Flexiplan is 21 cents';
(b)On Friday 28 June 1996 Ian McMinn spokesperson for the Respondent stated in an interview with Philip Clark on radio 2BL:
[McMinn]`The second point is that we have already a plan where people, if they make more than two local calls a day, get a 15% discount. So, in that regard the call comes back to 21 cents.'
[Clark]`So if you make more than two phone calls a day, then it only costs you 21 cents?'
[McMinn]`Yes, there is a flexiplan called C15, I think. I should know. No it's C15, and basically if you make more than two phone calls a day, which works out at $15 a month, you are entitled to ring Telstra up and try to gain, or not try to gain, I'll rephrase that, and ask for a Flexiplan which will give you 15% off, which effectively means that if you make two phone calls a day, you get 21 cents calls.'
...
[McMinn]`But in terms of local calls, if you make more than two a day, it boils down to 21 cents on a plan that we are offering right now.'
[Clark]`So as far as you are concerned the real cost of Telstra's local calls is, if you use the telephone a bit, 21 cents. Not 25'.
[McMinn]`Exactly. As far as we are concerned also, we go to all Australians too.'
........ ........ ........ ........ ........ .......
(i)On Friday 28 June 1996 in an interview with Matt Abraham on Radio 5AN Peter Shore stated:
`Right now, right across Australia, for people who spend more than $15 a month on local calls, that's 60 calls, they can apply for a volume base discount of 15% above that $15.'
........ ........ ..
`... as I said, for customers at a 25 cent call, that's 60 calls a month or on average of about two calls a day, once you pass that we have a 21 cent call offering.'
........ ........ ..
`As I said, we have a volume-based discount on offer, for people spending more than $15 a month.'"
Particular (c) alleges that on Friday 28 June 1996 "Johanna Plant (sic) managing director of local and access for the Respondent stated in an interview with Richard Glover on Radio 2BL:" There follows what is to be understood as a transcript of part of a conversation between Mrs. Plant and an interviewer. Unlike Messieurs Shore and McMinn, Johanna Joyce Plante swore an affidavit filed in the proceeding. Parts of the affidavit read:
"1.I am employed by the respondent (`Telstra') as Managing Director of the Access and Local Business Unit in its Retail Products and Marketing Group.
2.In my position with Telstra, I am responsible for, amongst other products, Telstra's Local Call Saver 15 Flexi-PlanTM
I am familiar with the features, availability and conditions associated with that product.
........ ........ ........ ........ ........ .......
5.When I was interviewed on Radio 2BL on 28 June 1996, I was asked questions about Telstra's Local Call Saver 15 Flexi-Plan and about statements that had been made earlier that day on the same radio station by Ian McMinn, another spokesperson for Telstra. I did not intend to make any false or misleading statements but the interviewer interrupted my answers. To the extent to which any of my statements were misleading, that was certainly unintentional."
Mrs. Plante was not cross-examined.
Particular (c) does not purport to record the whole interview, of which a transcript is in evidence. I do not take the admission of the allegations in the statement of claim to be an admission of every item in particulars. Having read that transcript I take any breach of s.52 or s.53(e) committed during the interview to be of less gravity than those recorded in particulars (a) and (b) and (i).
Exhibited to an affidavit was a recording of the broadcast television interview of Peter Shore on which particular (a) is based. Mr. Shore's relationship with the respondent was expressed by the respondent's Deputy General Counsel as "the managing director of our Commercial and Consumer division". Having watched the recording I am satisfied that the conduct of the interviewer made no contribution to the misrepresentations spoken by Mr. Shore, some of which he repeated the next day in a broadcast radio interview which is the subject of particular (i) and of which a transcript is in evidence.
No recording of the interview which is the subject of particular (b) was in evidence, but a transcript of the interview was in evidence.
The remaining particulars specify passages from newspapers published on 28 June 1996, in each of which misrepresentations of a kind alleged in one or more of the lettered sentences of paragraph 3 of the statement of claim are attributed to Mr. Shore. The evidence does not disclose clearly what events led to those attributions and for the purpose of determining what orders should be made those attributions will be ignored.
It was submitted by counsel for the respondent that the statements particularised under paragraph 3 of the statement of claim "is in effect a series of, as it were, off the cuff misrepresentations rather than a large advertisement placed in the newspaper with the authority of" the respondent.
The evidence did not disclose what, if any, warning the respondent had of the announcement of the inception of the Optus local call service, or of the announcement of the charge per call on that service. But the very great commercial significance of a comparison by telephone service consumers of the charges made by the providers of each service must have been obvious to Messieurs Shore and McMinn. The magnitude of the responsibility on each of them to avoid the publication to those consumers of misleading information was also obvious. If either of them lacked precise knowledge of the terms of the plan called Local Call Saver 15 Flexi-Plan, it is impossible to think that either of them had not immediate access to officers of the respondent who did have that precise knowledge. Their failure to avoid engaging in the misleading conduct specified in particulars (a), (b) and (i) was in the circumstances deplorable.
I accept the submission of counsel for the respondent that repetition of the particular misrepresentations about Local Call Saver 15 Flexi-Plan which were made on 27 and 28 June, or the making of any other misrepresentation about that plan, is quite unlikely. The respondent has publicly acknowledged its mistakes in the statements made on those two days and has diligently and promptly instructed its staff as to the precise terms and conditions of the plan.
The kind of conduct which has founded the proceeding is however, as I think, likely to be repeated. Under the exigencies which keen competition for the custom of a multitude of consumers imposes on the respondent it constantly resorts, as does its competitor Optus, to repetitive television advertisement marked less by information than by emotional stimulation. I would expect that the text of such advertisements would be carefully scrutinised by the respondent's advisers to ensure that no misleading conduct occurred. But at times when one or other of the competitors offers a revised charge for a telecommunication service of substantial interest to consumers the demands of television and radio broadcasters for exposition by the revising competitor and for prompt responsive comment by the other competitor will be often met at short notice. It is in those circumstances that the conduct of senior officers of the respondent on 27 and 28 June 1996 in response to such demands gives ground, as I think, to apprehend a likelihood of repetition of conduct of that kind. The harm done by conduct of that kind is not wholly undone by subsequent retraction and explanation and curial retribution. Among the multitude of consumers misled by such conduct not a few are likely to remain unaware of the retraction and retribution.
While the likelihood of future contravention of the Trade Practices Act 1974 by a respondent is regarded as a consideration relevant to the exercise of the discretionary power conferred by s.80(1) thereof (I.C.I. Australia Operations Pty. Ltd. v. Trade Practices Commission (1992) A.T.P.R. #41-185 at 40,524), consideration should in my opinion be given also to the question whether the power should be exercised in order to emphasise the court's disapproval of the respondent's conduct. Toohey J. observed in Trade Practices Commission v. Mobil Oil Australia Ltd. (1985) 4 F.C.R. 296 at 300:
"It is clear therefore that in determining whether to grant an injunction the court is not restricted because the factors mentioned in subs. (4) are absent. The question must still be asked - where those factors are absent, what purpose is an injunction intended to serve? The imposition of an injunction may, in an appropriate case, be an additional sanction to a pecuniary penalty. For instance, in the case of a particularly flagrant breach, even though there was no evidence to indicate the offender's intention to continue the offending conduct, it might be appropriate to mark the court's disapproval by an injunction as well as a monetary penalty."
I do not consider unjustified a description of the conduct of Mr. Shore under present consideration as flagrant.
It was submitted that because a very large number of the respondent's servants are required to furnish at short notice and in a brief conversation information to members of the public about one or more of hundreds of different charges for its many telecommunications services an order restraining the respondent from making a false or misleading representation with respect to the charge for such a service would comprehend conduct quite different from that which is the subject of this proceeding and ought not to be made. I accept the submission and will confine the operation of the order to a representation made for transmission to the public in a radio program or a television program.
It was submitted that, because in respect of some of the respondent's telecommunications services the charge could, and often did, vary from customer to customer, the respondent would be at risk of contravening an injunctive order in circumstances quite different from those with which the court is presently concerned. The charges under consideration in this case were uniform in relation to all customers who elected to be charged in accordance with the Local Call Saver 15 Flexi-Plan. I do not consider that difference of circumstance a reason to abstain from enjoining the respondent from broadcasting false or misleading representations about any of its charges for a telecommunications service.
It was said that, because amendments of the Telecommunications Act 1991 which may be expected to come into effect in July 1997 will change significantly the legislative regulation of the respondent's tariffs, and in particular will be likely to result in a greatly increased number of different charges, an order based upon, and expressed by reference to, that Act in its present form ought not to be made. But the court is empowered to rescind or vary an order of the kind I contemplate : Trade Practices Act 1974, s.80(3).
In all the circumstances I consider it appropriate to order that the respondent be restrained until 31 December 1999 from making in Australia in trade or commerce a false or misleading representation for transmission to the public in a radio or a television program with respect to the amount of any charge, within the meaning of that word defined in section 5 of the Telecommunications Act 1991, for a telecommunications service, within the meaning of that expression defined in the said section 5, offered by the respondent to be supplied in Australia to any person or persons.
Neither at the commencement of this proceeding nor at any time since then has the respondent put in issue the allegations upon which the applicant relies to obtain the relief sought in the proceeding. There has not been in the proceeding a controversy as to whether on 27 and 28 June 1996 there were contraventions by the respondent of ss. 52 and 53(e) of the Trade Practices Act 1974. In those circumstances I do not consider it appropriate to make any declaratory order that there were.
The respondent should pay the applicant's costs.
I certify that this and the 12 preceding pages are a true copy of the Reasons for Judgment of the Honourable Justice Jenkinson.
Associate
Dated: 13 December, 1996
Counsel for the Applicant : Dr. P. Buchanan Q.C.
Counsel for the Respondent : Mr. B.J. Shaw Q.C. and Mr. C.M. Maxwell
Solicitor for the Applicant : Australian Government Solicitor
Solicitor for the Respondent : Mallesons Stephen Jaques
Date of Hearing : 30 July, 1996
Date of Judgment : 13 December, 1996
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